The International Chamber of Commerce has released the ICC Incoterms 2020 update of their international trade terms for the sale of goods on September 10, 2019. Incoterms defines the responsibilities of sellers (exporters) and buyers (importers) engaged in cross-border trade regarding the delivery of tradable goods. These are the standards regarding the delivery methods created by the International Chamber of Commerce “ICC”.

There are 11 delivery terms available under the Incoterms 2020 rules. Who will organize the shipment? Who will pay for the costs incurred in the various stages of the shipment? Who owns the insurance liability? Who will do the customs clearance? You will find answers to all these questions and in our article. But first, we’ll talk about the changes.

What are the key changes in Incoterms?

We have listed the main differences between incoterms® 2020 and incoterms 2010 under basic headings:

Free Carrier (FCA) Key Changes & Updates:

The most crucial change in Incoterms 2020 rules relates to FCA. FCA delivery term is divided into two subgroups for sea and road freight. The reason for this was the problems experienced in ship loading, especially in sales with letters of credit, although there were no problems in truck loading. The seller’s responsibility ended when the freight was delivered at the port, but banks request a bill of lading with an on-board notation.

The seller does not control shipments under the FCA term, so the carrier has no obligation to the seller. With Incoterms 2020, the buyer company will be able to add a condition to a contract with the seller that “the shipping company will deliver the bill of lading to the seller company. Shipment charges and all risks belong to the buyer, but the bill of lading will be given to the buyer. Finally, the buyer sends the BL with the document set to the bank by the buyer.

In Incoterms 2010 and earlier versions, the main problem with FCA was that, in multi-shipments and especially in maritime transport, before loading the export cargo on the ship, for example, the delivery obligation of the seller was completed at the port entrance. For example, if a letter of credit was made, the bank requested the bill of lading from the exporter and held responsible for the details that should be written on the bill of lading.

However, the seller was liable for the document that he was not responsible for when his relationship with the shipping company was completed. This problem was resolved with the revision made in Incoterms 2020. FCA has changed to allow the buyer and seller to agree that the seller will get an on-board bill of lading.

Changes Regarding CIF and CIP

In Incoterms 2010, insurance policies on CIF and CIP shipments were prepared with a minimum level of coverage. Within the scope of Incoterms 2020, it has been decided that the “Clauses (C) of the LMA / IUA Institute Cargo Clauses” which is currently valid for CIF will be insured at the minimum insurance level.

For CIP shipments, “Clauses (A) of the Institute Cargo Clauses”, ie insurance including all risks, is mandatory. Therefore, the degree of insurance liability in CIF and CIP shipments, which we can separate as port delivery in the importer’s country and delivery to the importer’s address, has changed.

DAT changed to DPU

The rule is known as DAT (Delivered At Terminal) under Incoterms 2010 has been renamed DPU. DAT was renamed DPU (Delivered at Place Unloaded) to emphasize that the address to which the goods will be delivered can be anywhere, not just a terminal. At this point, if the delivery address is not a terminal, i.e. a customs point, it should be a suitable place to unload the goods.

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Arranging For Carriage With Seller’s Or Buyer’s Own Truck

Incoterms 2010 was created assuming that international transportation will be carried out by a third company other than the buyer and seller company, namely a shipping company. With Incoterms 2020, it is stated that the exporter or importer company can now carry out international transportation with its own vehicle. We see that its effect the delivery terms FCA, DAP, DPU and DDP.

The obligation of the Insurance Declaration in DAP, DDP, DPU

The DPU has begun to replace the DAT delivery term. In Incoterms 2020, for DAP and DPU delivery methods, it was not clearly stated whether the insurance belongs to the exporter or the importer, this was not clear in previous versions. Unless specified by a special clause in the sales contract or proforma invoice between the parties, the exporter company organizes the shipment without insurance. In this case, the importer company must take out insurance for the safety of the cargo and compensation for possible damage.

Incoterms 2020 more clearly reveals the costs incurred in the export and import stages. Clearer listing of costs: All costs associated with relevant Incoterms® are now listed under A9 / B9 “Allocation of Costs” to provide a single list of costs.

In Terms of Customs Transactions: Export, Import & Transit Trade

Incoterms 2020 more clearly classifies the responsibilities of exporters and importers at the customs clearance stage. The problems experienced so far have been studied, and the role of the seller and the buyer in customs transactions has been clarified, taking into account the costs and risks for exporters and importers, taking into account these experiences. In addition, the transactions included in transit goods were mentioned in Incoterms 2020.

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Incoterms 2020 Basic Classification

In the previous versions of Incoterms, we see that a distinction is made according to the delivery types starting with the letter E, F, C and D, or classification has been made according to sea freight and multimodal transport types. While organizing Incoterms 2020, mainly the responsibilities and risks of the companies were taken into consideration, and the decisive point was the stages of the shipment and the determination of the parties undertaking the transportation risk.

8 incoterms consisting of EXW, FCA, FAS, FOB, CPT, CFR, CIP and CIP are delivery methods in which the shipping responsibility belongs to the buyer wholly or partially. DAP, DPU and DDP, where the responsibility and risk of transportation are on the seller, were accepted as the second category.

Classification of Incoterms by Transport Type
Category Incoterms
Multimodal (air / sea / road / railway) EXW,  FCA,  CPT, CIP, DPU, DAP, DDP
Sea and River  FAS,   FOB,  CFR,  CIF

 

Sydney International Freight

Choosing the optimal freight services according to various delivery terms requires to analyze and understanding of liabilities and costs. , Our freight shipping experts, will guide you to help you determine the best freight shipping options according to your needs and budget.

Sydney International Freight offer options between Australia and all ports, airports and customs points on all over the world. Every year, thousands of companies deliver their cargo to us without any questions about the shipment process. We specialize in the international transportation of cargo. We provide both “FCL” & “LCL” overseas services plus export & import cargo services with 40 years experience.

What is a Container:

Containers are structures in the form of a steel box, manufactured to deliver your cargo to the delivery address in an efficient, safe and undamaged manner within the transportation system with international standards.

Different modes of transportation make it possible transport containers by transferring from vehicle to vehicle without unloading the materials inside. Multimodal transportation enables containers to be transported over thousands of kilometres by being loaded on different vehicles such as trucks, ships and trains.

Container transportation, as a safe and fast transportation option, enables the transport of many different products, from household goods to commercial goods, from food products to natural gas. Container transportation provides this flexibility, with varying types of containers for different products. We are talking about a dry container, flat container, reefer (refrigerated) container, tank container and many more container types. As of 2020, approximately 17 million containers are used worldwide.

Approximately 2.5 tons of steel is used in the construction of a 40 ‘container. Each corner of the container is designed to handle a load of 96 tons. The floor to carry a load of 24.5 kg per cm². It is the most preferred transportation method for tons of heavy construction equipment, automobiles, metal equipment and thousands of different products.

DRY CONTAINER – STANDARD CONTAINER

The most frequently used container types in export and import shipments are 20’DC and 40’DC containers. The acronym DC stands for “Dry container”. This type of container does not require any special transportation method.

Although these types of containers are referred to as “dry van” or “standard” in some business correspondence, often the term “general purpose” is more appropriate. It is named with the acronym DC. While widths of DC containers are fixed, they are available in different lengths and heights. When choosing the container, you have to decide on the quantity and dimensions of the product to be transported.

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The most common types of DC Container
20 ‘DC CONTAINER

The outer length of the 20′ container is 6.058 mm. The width is 2.438 mm. The height is 2.591 mm.

Internal dimensions: We need to know the interior dimensions of the container to calculate how much space the cargo to be transported will take up in the container. The interior dimensions of the 20′ container have been determined as 5.710 mm (length), 2.352 mm (width), 2.385 mm (height). The 20′ container volume is 33 m3.

When planning Dry Container loading, door dimensions should be considered. The door opening is 2,343 mm wide and 2,280 mm high.

The empty weight of a 20′ container is 2,200 kg. Maximum 28.250 kg can be loaded. But the upload limit varies from country to country. Therefore, we recommend that you find out the maximum weight that can be transported in the ports and roads in the destination country before shipping.

40 ‘DC CONTAINER

The 40′ container has a length of 12.192 mm. Its width and height are the same as 20′ container. The width is 2.438 mm. The height is 2.591 mm.

Internal Dimensions: 40 ‘container only changes as length 12.032 mm. Internal dimensions are the same in width and height. It is 2.352 mm in width and 2.385 mm in height. The capacity of a 40′ container in cubic meters is 67 m3.

The width and height of the 40 “container door are almost the same as the 20′ container. The door width is 2.343 mm, and the height is 2.2580 mm.

The empty weight of 40′ container is 3.750 kg. Up to 30 tons can be loaded in 40’ containers. But our recommendation for a 20 “container applies in this case. Before planning the shipment, we recommend checking the shipping limits in the delivery port and the country of delivery.

40 High Cube / 45 High Cube

This type of container is used for the transportation of relatively light but high volume goods. Their height is 30 cm more than a normal 40′ container. The internal volume of High Cube containers is more than 40 “containers due to their height, but their weight carrying capacity is the same.

20 Open Top / 40 Open Top

It has the same dimensions as a typical dry container, except that it doesn’t have a “fixed-top”. It is used when loads that are too long or too wide to fit into the container from the door can only be placed from the top by crane or similar tools. It is mostly used to transport products such as machinery, marble plates, aluminium profiles. Open top containers are often used for overflow loads.

The top of the container is tightly covered with a tarpaulin after loading. The base is slightly thicker than the other containers, as it carries heavy loads. Since Open Top containers are classified as special equipment, the surcharge is usually added to the freight.

20 Flat Rack / 40 Flat Rack / 40 Closable Flat Rack

Sometimes its referred to simply as “flat”. This type of container has no four sides and no top. Sometimes both heads can be dislodged. The flat container is suitable for loading goods with both sides and overflow. The surcharge is added to the transportation fee for the loads exceeding the container dimensions.

40 Reefer / 40 High Cube Reefer / 45 High Cube Reefer

It has a cooling unit attached to the container and driven by an electric or diesel engine. The cooling system makes it possible to transport food products, medicines and similar medical products with these containers.

20′ Tank Container

It is a container type, which consists of a container, which is a carrier element, and a profile frame, in which liquid or gaseous substances are generally carried. It is a safe and low-cost transportation vehicle in terms of transporting liquid and gaseous substances.

From Australia to all over the World

If you are going to export from Australia to any country in the world. For FCL and LCL shipments, it is important to get an offer from a company experienced in sea shipping for the right container selection.

Australian Sea Freight

If you are going to ship an overseas shipment, whether personal items or a commercial shipment you have to foresee under what conditions and through which processes your cargo will complete its journey.

We have summarized the basic information you will need to reach the destination address without any problem, the cost of the shipment to be made by a company or person. We explained all the stages of an international post in 7 steps.

1- International Shipping Procedure Research and Preparation

First of all, our first advice is to determine what country you want to send. Is there a precondition, document request or restriction for your shipment to be accepted into that country? Likewise, do you have to do anything other than standard export procedures to get these products out of your country? In short, if you are going to make a personal effect or a commercial post, do preliminary research first.

For example, during the Covid19 pandemic period, there are countries that restrict the export of some medical products. On the other hand, request extra certificates from importers and impose restrictions.

2- Choose and Organize The Transfer Vehicle

If you are making an international shipment, be it a personal item shipment or a commercial shipment from a company, You need to determine what kind of shipping vehicle you should use according to the volume of the cargo to be shipped, the deadline, the geographical location of the destination and your budget.

So the first thing you have to do is learn the weight and dimensions of your load, the number of parcels, the total load volume, and decide how it should be transported. Your load may be a few parcels of several hundred kilos, ie a partial load. A complete house can be in a container full of goods, or it can be a goods transfer consisting of dozens of containers between companies.

3-Inland Transport (Inland Haulage in the exporter’s country)

When calculating the cost of a shipment, take into account the intermediate shipment between the original shipping vehicle and the point where the material is located. For example, you loaded the products in your factory into the container, then the container will need to be transported to the port. Intermediate transportation should be planned considering the properties of the product to be loaded and the physical conditions of the first loading point.

For example, you brought a container on the truck to load heavy pallets. However, if the container on the truck requires an additional forklift to load the pallets and you have not planned this from the beginning, the operation will be disrupted. Another example is that you have brought containers to transport your household goods, but the street where your home is located is not suitable for unloading the container or entering a container truck.

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4- Export Customs Clearance & Procedures:

If you are going to make an international shipment, you will definitely need a customs broker service. Some shipping companies, especially freight forwarders, can help you in this regard. whether you’re shipping personal household items or commercial goods. Ultimately, you need help to prepare offical papers that should be prepared by a customs broker. Before a declaration can be made, you must get a customs broker service.

5- International Shipment:

The process that takes a ship leaving the customs point in your country, for example the port, until it reaches the customs point in the country of shipment, for example, a port. The ownership of all loads on the transport vehicle is determined by a document called bill of lading. CMR for road vehicles, AirwayBill for aircraft loading and Bill Of Lading for sea freight. On this document, there are details such as the names, addresses, name of the transported cargo, type, parcel number and weight of the buyer and seller company.

Ships are the most used shipping vehicle worldwide and container transportation is the most preferred form of cargo transportation. If the delivery point is in a city that does not have a coast, the loading types that allow the container to reach the delivery point from the nearest port and include transfer vehicles such as additional roads and railways are called multimodal loading.

6- Import Customs Clearance & Procedures:

When the freight reaches the destination country, for example, in a port or airport. Customs procedures are carried out in order for the international shipment to become the property of the importing company or person and nationalize. In order to carry out import customs procedures, usually, a bill of lading, invoice, certificate of origin and packing list is required.

Depending on the product type and customs regulations of the importing country, extra documents and certificates may be requested. In order not to have a bad surprise at the last moment, the preliminary research, which we explained in the first step of our article, should be done well. The most accurate method is to consult the importer company and the customs broker in person to get information about the required documents.

7 – Inland Transport (Inland Haulage in the importer’s country)

If the exporting company has not made a port delivery agreement. Delivery terms; If it includes address delivery shipping obligations specified by abbreviations such as CIP, DAT, DAP, DDP, you must also organize the intermediate transport in the country of destination in advance.

If you are organized the delivery for such as personal effects, or vehicles such as personal cars. You will need to organize internal transport to the destination port and destination country to the address where your residence or belongings should arrive.

Global perspective, Local service quality

The international shipping business takes place effortlessly and safely as long as you get service from a specialist company: different destinations, different transport requirements, different people. The common point is that they expect a fast, economical, high quality and safe logistics service. At this point, Sydney International Freight stands out as one of the most preferred companies in maritime transport and aircraft loading, specialized in commercial and personal shipments.

Sydney International Freight is one of the leading freight forwarder company, which is Australia based with more than 40 years of experience of overseas shipments and innovative service systems.

We offer options between Australia and all ports, airports and customs points in the world. Sydney International Freight is at your service for your FCL (full container load) and LCL (less than container load), all types of parcels and personal goods delivery options by seaway, airline and multimodal loading options.

specialised-project-and-logistics

Sea shipping is the world’s most common shipping method as an economical and safe method of transportation. According to the data of 2020, approximately 100,000 ships worldwide carry around 2 million tons of cargo for a year. Container shipping from Australia to Europe, America, Africa and Asia is a global supply chain that enables the transfer of commercial and private goods between thousands of ports in hundreds of countries.

Shipping companies: Shipowners vs Freight Forwarders

Ship-owner companies such as Maersk, MSC, Cosco, as the world’s largest shipping companies, form the infrastructure of maritime transportation with the ships and containers they own. However, the main actors of the sector are freight forwarder companies, which generally provide local services.

The main reason for this is that customers who want to move their cargo from one country to another want to receive local service. What we mean by local service is that operations are carried out accurately and safely and that you can find an authorized and relevant company representative when you have a question or a problem.

For example, suppose you are planning an FCL or LCL shipment from Sydney to New York. In that case, the content of the service that a global shipper will provide to you consists of providing a website link where you can track the movements of your cargo. These companies using a random customer service, So each time different customer representative answer your calls with limited authority and knowledge.

Which Type Of Cargo Is Suitable For Sea Transportation?

Maritime transport is not suitable for small diameter loads. For a package which is less than 100 kg, or less than 1 or 2 parcels, the airline shipping price offered by express courier services is more favourable.

Another issue; Anything that can fit in a container can be transported, except for goods added to the restricted list by countries. There are far fewer restrictions on what can be transported using sea transport compared to air transport.

The “width * length * height” dimensions of the goods to be transported must be appropriate for loading those items into the container and unloading them at the destination port. Please review the container size chart below.

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Freight forwarders: Strengths & Advantages

What makes a Freight Forwarder advantageous, especially if it is a company that is deep-rooted and following innovations, will serve you with a combination of traditional methods and current practices to provide you with the best service.

“Sydney International Freight” is one of the leading freight forwarder companies in Australia with almost 40 years of experience. A Company specialized in the shipping of commercial goods, private cars, household goods & personal effects worldwide. As a freight forwarder, it stands out among Australia and all ports of the world with the best price, fastest and most reliable information flow, professional solution to all your questions and questions about transportation.

How to Get a Sea Freight Quote

For shipping companies to determine the transportation costs of your freight and offer you a price quote, you must have the following information.

  • Origin and destination of the shipment
  • Total number of parcels
  • Boxes or pallet dimensions & weight (width * length * height)
  • The type of product to be shipped. (to determine the conditions of carriage)
  • Mention your expected delivery time. If there is a deadline, specify it.

Sea Freight How Long Shipment Process Take?

The shipment process that will take place between the port where the goods will be loaded and unloaded, that is, the time the ship will spend at sea determines the duration of the shipment. This time varies according to the physical distance between the two ports. However, when calculating the time, the time required for customs procedures to be performed at both the loading and unloading ports should also be taken into account. You should get information from shipping companies for up-to-date shipments.

 

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How Does Sea Shipping Work?

It is important to work with freight forwarders for the shipment of commercial goods or personal effects abroad. Customs procedures, including export and import procedures, will be carried out at the beginning and end of an international shipment. Therefore, we recommend that you work with a freight forwarder to avoid errors that can result in costly costs and penalties.

The general steps you should take to organize a sea shipment are:

  • Choose a freight forwarding company that is specialized in its field and works actively in the region you will be shipping to and get a price quote for the service you need.
  • The shipping company will collect the goods from you or from your supplier if you have asked to pick them up from a supplier abroad.
  • Your shipment is transported to the port.
  • Goods are loaded in a container (FCL) or a shared container (LCL)
  • Registration is done in the port regarding the sample process A draft Bill of Lading is prepared. Your customs brooker frim handles customs clearance.
  • The ship leaves and the journey begins to the destination port.
  • When the ship reaches the destination port, the shipping company will send you an arrival notice.
  • At the destination port, the container is unloaded to the customs area.
  • Customs procedures are carried out
  • Port exit permit is taken for the container whose customs procedures are completed. If you have an address delivery agreement, the container is transferred to the address you want by an intermediate transport vehicle organized by your carrier.

Logistics, in its simplest definition, is defined as the transportation of a product or a good from one point to another. If you need to ship to another country, you should choose the safest, most economical and, if possible, fastest option for shipping your personal effects (household goods), shipping your personal car, or shipping your commercial cargo.

Many factors that need to be managed such as the structure of the product, the budget allocated for the logistics of the product, the location of the product and the location where the product should be delivered, duration, process and climatic conditions come into play in the planning of this transportation. Here, the expertise of your logistics service provider shows itself at the points where these elements are handled with all visible and invisible components and managed and directed correctly.

Modes of Transportation

Air Transportation

Airfreight offers numerous advantages for international trade, depending on your needs. In general, it is not preferred to transport cargo with large sizes and many parcels by air.

By air, it may be preferable to transport small-sized partial household items and personal equipment such as clothing, instruments, and electronic products. In terms of commercial loads, we see that freight with deadlines, shipments made with small packages such as samples, and aircraft are preferred for the shipment of industrial products.

Road Transportation

Road transport is a suitable option for international shipments that are bordering each other or can be reached by crossing several countries by road. However, as the distance increases, costs and risks increase exponentially.

Although road transport is the first and most common form of transportation in logistics, it is both costly and risky. The rate of goods damaged during road shipment is more than five times that of the shipments made by aircraft and dye. Road transport is not an option for overseas loads.

Multimodal (Intermodal) Transportation

Intermodal transportation provides the fastest and most economical shipment possible by using more than one transportation vehicle. If an overseas shipment is required to be delivered in an inland area far from the sea, multimodal transportation enables address delivery. e.g. container loaded from Sydney. It is transported to the port of Rotterdam by ship. Then, after travelling 280 miles, it is transported by truck to the address in Frankfurt.

Maritime Transportation

For transporting household goods, the container is the most suitable option. Especially with FCL Container, sea transportation is the most economical and the container is the safest shipping method as the risk of damage and loss of your packaged goods in the container will be minimized. There are weight and length limitations for airfreight packages. So even if you accept the high cost, personal effects that can be transported by plane are limited.

The variable costs of maritime transport are very low, and it is seven times cheaper than road and three times cheaper than rail. While road and rail transport is only possible on the mainland, maritime transport can be done all over the world. The Multimodal option offers a complex solution that involves the transfer of the cargo unloaded at the port to landlocked cities by road.

Shipping by sea is very fast due to the advanced loading and unloading techniques applied in modern ships and ports that travel continuously for 24 hours.

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Interesting Facts About Maritime Transportation:

  • Maritime transport is the most popular method of shipping on our planet 3/3 covered by seas. 83% of the world trade is carried out by sea transportation.
  • A large container ship makes three-quarters of the distance between the earth and the moon in 1 year. It is considering that the average service period of cargo ships is 15 years. During the time a cargo ship is in service, it travels ten times to the moon.
  • What if we wanted to load all the containers that can be loaded on an 11,000 TEU freighter on a train. This train should have been 44 miles long.
  • Maritime transport is an environmentally friendly option with low emission rates. With 1 ton of cargo, a freighter travels 7,935 miles between Port Melbourne, Australia and Long Beach Port in the USA. The resulting emission rate evolves to 1442 miles if 1 ton of cargo is transported by a truck.

From Australia to all over the World

Choosing between the different types of freight services with different expectations needs an expert guide. Sydney International Freight, our freight shipping experts, will guide you to help you determine the best freight shipping options according to your needs and budget.

We offer options between Australia and all ports, airports and customs points in the world. Sydney International Freight is at your service for your FCL (full container load) and LCL (less than container load or groupage) loads with seaway, airline and multimodal loading options.

The major production and export from New Caledonia is nickel, which is predominantly shipped as ore in huge volumes to Japan and Europe for processing.

Exports to Australia are very minimal, but because of mining, there is some machinery that is exported from New Caledonia to Australia for refurbishment or parts.

New Caledonia is a GAS (Giant African Snail) country, and any import from New Caledonia is subject to very stringent DAFF (Quarantine) checks.

Despite the nearness of New Caledonia, freight rates for air, courier, or seafreight are very expensive.

Port charges in Noumea are government controlled for both import and export, and are in addition to any freight rates quoted and are relatively expensive.

New Caledonia is known for its huge nickel deposits, which becomes its major export. Exports to New Caledonia revolve around foodstuffs, building, construction and mining. New Caledonia is governed by France, and is therefore considered as part of Europe. As such, despite its closeness to Australia, there are duty concessions for any goods from Europe, and in fact there are many goods that are simply not allowed to be exported to New Caledonia from Australia. There are strict French labelling laws for any goods that are sold by retail, and many import rules and restrictions of which any new exporter to New Caledonia should thoroughly check before trying to break into this marketplace.

But, almost all mining machinery, equipment and parts can be exported to New Caledonia.

Noumea is the capital and commercial centre of New Caledonia. Noumea and other major towns are serviced for FCL (full container load) cargoes. Generally there is a fortnightly LCL (less than a container load) consolidation services to Noumea from Sydney Melbourne and Brisbane. Noumea (Tontouta) is only serviced by direct air flights from Sydney and Brisbane, and being mostly smaller aircraft, cargo is restricted except for the Wednesday flight ex Sydney. Other islands and towns in New Caledonia are all served from Noumea, and all customs clearance service must take place in Noumea.

Despite the nearness of New Caledonia, freight rates for air, courier, or seafreight are relatively expensive. This is because of infrastructure costs, and the fact that in the main, freight services are one way only.

Please do not hesitate to enquire about exporting your goods to Noumea, use the form to the right to make your enquiry.

Things to consider when you are selling internationally.

When you are selling overseas, your customer needs to understand what they are paying for, and who is supposed to do what.

The last thing you need to have (not) happen, is for your shipment and payment to be delayed because your customer or you has misunderstood the responsibilities of each party.

If you are unsure as to your terms of sale and what you are comfortable with, then you should talk to your forwarding agent who can explain these terms and ensure you get the best services to match you sale terms.

These shipping terms are referred to as INCOTERMS and are common globally. The exception is USA where what they understand and the rest of the world understands is very often different. So, when dealing with the USA, you need to be particularly clear with what your customer expects when your are quoting export prices and terms of sale.

There are INCOTERMS to cover every possible transport option; but the vast majority of purchase terms are: EXW, FOB, CNF, CIF, DDU and DDP.

Depending on your level of comfort with any purchaser, you may require the additional security of having a Letter Of Credit, but that is a separate issue, and does not affect the shipping terms of any sale.

As a general guide; this is what they mean:

EXW = ex works. Very simply, you have quoted a rate ex your factory/premises. You will pack the goods for export or may even pack the goods into a container for export – but your customer is responsible for providing the transport and container if the shipment is FCL (Full Container Load), plus all of the freight, port and handling charges this end; plus any marine/transit insurance, If you do not have the facilities to pack containers on site, then you may just give the cargo to your customer’s nominated agent for them to arrange the packing of the containers as well. Normally you would heve already been paid for the goods before pick up, but you may have some sort of account with your customer.

FOB = Free On Board. This is similar to EXW, except that you are responsible for the delivery of the goods to the port for shipping. From Australia, and/or unless you agree otherwise, all charges relating to export declarations, export documents and shipping line port and documentation charges are also the responsibility of the purchaser. The USA can be an exception if your customer thinks that FOB is actually EXW. You should always check with your customers that you both understand what is covered by your terms of purchase.

CNF = cost and freight. In this case, uou also arrange and pay the freight all the way from ex works to arrival at your customer’snominated port of discharge. In this case, it is theoretically (more later) the responsibility of your customer to arrange and pay for any insurance on the goods.

CIF = cost, insurance and freight. Similar to CNF except that you also arrange the transit insurance. As the seller, you should always check with your unsurer that the coverage is exactly what you expect it to be.

DDU = Door delivered, duty unpaid. Your are responsible for all charges for having the cargo delivered to your customer’s nominated address, but you are not responsible for any import duties, GST and customs entry fee.

DDP = Door delivered, duty paid. In this case you are responsible for all charges including any duties and taxes up to your customer receiving the goods. This is a very dangerous way to sell goods unless you are very sure of what import duties and taxes are applicable in the destination country.

 Each of these arrangements has its place. There is no right or wrong reason to sell your goods under any of these terms, although some may make more sense depending on your customer and your specific requirements.

It is always recommended that you insure your shipment(s), but the reality is that you need to consider the value of the goods, the cost of insurance, the risk involved, and any excess charges or restrictions that might apply.

If you are a business, and you are doing multiple transactions, then you should discuss this with your insurance broker who provides your other business insurance and check if your import or export transactions are included as well.

Failing that, you can get an individual policy for each shipment; but this will always work out more expensive than if your shipments are just part of your annual business insurance, or you have taken out an annual policy to cover your shipping.

For import shipments, you are responsible for insuring your shipments if they are ex works (EXW), FOB or CNF. If the shipment is CIF, then you should ask for your supplier to send you a copy of the insurance policy that covers each shipment.

For export consignments, theoretically the reverse is true. But, just consider your exposure.

A friend of mine is exporting containers on an FOB basis; so theoretically his customer is arranging for insurance on the goods. But once, one of his containers arrived at the destination, and the consignee rejected the goods (for whatever reason); so, the exporter was stuck with a container load of product (that he had already paid for) in another country, for which he then had to try to find another buyer (at a hugely discounted price) or have the cargo destroyed at his expense. So, even though the importer was technically responsible for insuring the goods, the end result is that by him not doing so, it cost him a small fortune. All of which could easily have been avoided had he insured the goods in the first place. Now, regardless of the terms of sale, this exporter insures all of his shipments.

Insurance of personal effects is something that comes up regularly. If you pack the cartons or container yourself, then you will only be able to insure your goods for total loss. Breakage or damage or theft will never be included in this case. International removalist companies may offer this as an option if you were to utilise their services on a door to door basis, but you should check.

When you are purchasing from overseas, you need to understand what you are paying for, and who is supposed to do what.

The last thing you need to have (not) happen, is for your shipment to be delayed because you and/or the supplier have misinterpreted or misunderstood the responsibilities of either party.

If you are unsure as to what your overseas supplier is offering, you should always talk to your forwarding and/or your customs agent who can explain these terms and ensure you get the best services to match the purchase terms.

These shipping terms are referred to as INCOTERMS and are common globally. The exception is USA where what they understand and the rest of the world understands are very often different. So, when dealing with the USA, you need to be particularly clear with what the supplier means when he is quoting you a price or giving you a proforma invoice. Do not presume that FOB means the same to them as what you think it means.

There are INCOTERMS to cover every possible transport option; but the vast majority of purchase terms are: EXW, FOB, CNF, CIF, DDU and DDP.

As a general guide; this is what they mean:

EXW = ex works. Very simply, your supplier has quoted you a rate ex their factory/premises. Your supplier will pack the goods for export or may even pack the goods into a container for export – but you are responsible for providing the transport and container if the shipment is FCL (Full Container Load), plus all of the freight, port and handling charges that end. Some suppliers do not have the facilities to pack containers on their site and may only give you the cargo for you to arrange the packing of the containers as well- you need to confirm this with your supplier and your forwarding agent.

FOB = Free On Board. This is similar to EXW, except that the supplier is responsible for the delivery of the goods to the port for shipping. In most cases the supplier is responsible for the export documentation and the export shipping line and port charges. Unfortunately, USA is generally an exception; many suppliers think that FOB is actually EXW. You should always check with your suppliers that you both understand what is covered by your terms of purchase – particularly when it comes to the USA.

CNF = cost and freight. In this case, the supplier is to also arrange and pay the freight all the way from ex works to arrival at your nominated port of discharge. In this case, it is your responsibility to arrange and pay for any insurance on the goods.

CIF = cost, insurance and freight. Similar to CNF except that your supplier also arranges the transit insurance. As the purchaser, you should always insist on a copy of the insurance policy or certificate and make sure that you check with the local correspondent for this insurance that it is completely valid and covers exactly what you expect it to.

DDU = Door delivered, duty unpaid. Your supplier is responsible for all charges for having the cargo delivered to your nominated address, but you are responsible for any import duties, GST and customs entry fee.

DDP = Door delivered, duty paid. In this case you do nothing, your supplier is responsible for all charges including any duties and taxes up to you receiving the goods.

Each of these arrangements has its place. There is no right or wrong reason to purchase your goods under any of these terms, although some may make more sense depending on your specific requirements.